Grupo Aval's Q2 2025 Earnings Call: Unpacking Contradictions on Risk Costs, Pension Reform, and Interest Margins

Cost of risk and provisions, impact of pension reform on Porvenir and Porvenir's loan growth, interest margin evolution and monetary policy impact, capital requirements and pension reform impact, cost of risk and loan loss provisions are the key contradictions discussed in Grupo Aval's latest 2025Q2 earnings call.



Financial Performance and Profitability:
- Grupo Aval reported a net income of COP 856 billion for the first half of 2025, which is 1.7x higher than the same period in 2024.
- Net income for the second quarter was COP 494.9 billion, growing 37% over the quarter and 142% year-on-year.
- The growth in profitability was driven by a positive trend in cost of risk, a gradual improvement in net interest margins (NIM), and controlled spending.

Net Interest Margin and Loan Growth:
- The net interest margin (NIM) on loans reached 4.5%, the highest level in three years, with a consolidated NIM of 4%.
- Gross loans grew 3.2% year-over-year, while deposits grew 6.8%.
- The improvement in NIM was attributed to higher yields on investments and better loan portfolio quality, despite slower-than-expected recovery in NIM due to high Central Bank intervention rates and intense price competition.

Efficiency and Cost Management:
- The cost of risk for the quarter was 1.7%, the lowest level since the first quarter of 2023.
- Total expenses increased 2.4% quarter-on-quarter and 9.2% year-on-year, with general and administrative expenses up slightly by 0.8% quarter-on-quarter.
- Efforts to enhance operational efficiency, such as centralizing payroll management and building a procurement synergy center, contributed to better cost control.

ESG Initiatives and Social Impact:
- Grupo Aval made significant progress in its ESG agenda, updating its double materiality assessment and launching initiatives like the Aval Board of Directors guideline.
- The company expanded sustainable mobility initiatives and fostered collaborative action in communities, positively impacting education, sports, and tourism.
- These initiatives align with Grupo Aval's commitment to sustainable management and long-term value creation for stakeholders.